We received some good unemployment and durable goods data today. The U.S. Department of Labor reported that new unemployment claims fell to a seasonally adjusted 261,000 last week, its third consecutive drop in as many weeks. New jobless claims this summer have stood more or less near their lowest level in 40 years—at under 300,000 for 77 consecutive weeks, the longest span since 1970. Generally the labor market is considered strong and growing when claims stay below 400,000. Read more about Markets Uneasy in Advance of Confab 08-25-16
Yesterday, in the minutes released of the July Federal Open Market Committee (FOMC) meeting, we learned more details on the thoughts of the policymakers. As we had expected, the notes showed that the majority of committee members want to wait to raise the federal funds rate until economic data shows more convincingly that inflation has at last moved toward the Fed’s 2 percent target. A small minority disagreed and wanted to raise rates July. Read more about Steady Rates Favor Steady Dividend Stocks 08-18-16
Last Friday the U.S. Bureau of Labor Statistics reported that the U.S. economy had added a robust 250,000 nonfarm jobs in July, giving new strength to recent economic data. Wages also ticked up slightly. The S&P 500 Index thus tapped a new record.
While the strong jobs data fueled speculation that the U.S. Federal Reserve could raise interest rates next month, in fact employment remains less rosy that it may appear at first glance. More people aged 65 and up now work than at any time since World War II, meaning younger workers—what should be the core of the labor force—account for less of the labor pool as a result. The overall labor participation rate still hovers near 40-year lows. Read more about Good News and Bad 08-11-16
Big news today came from the Bank of England: its Monetary Policy Committee cut its benchmark lending rate by half, to 0.25 percent from 0.5 percent. That marks a new all-time low in the bank’s entire 322-year history. Britain’s central bank also said it plans to reinstate a program to purchase corporate bonds next month and will buy billions of pounds worth of four-year loans so that banks can actively lend.
The move, very much expected, came as a direct response to the June 23 vote by the majority of British voters to secede from the European Union. Britain’s growth outlook as “weakened materially” as a result, the BOE said in a statement. It cut its growth forecast for 2017 to 0.8 percent from the previously projected 2.3 percent, the most it has sliced its expected growth projection from any one quarter to the next. Read more about More Pressure on Rates, Dividends Look Good 08-04-16
Yesterday, the Fed concluded its latest policy-setting meeting. As expected, Janet Yellen and her top lieutenants decided to keep the benchmark federal funds rate unchanged at a target range of 0.25 to 0.5 percent, where it has remained since last December when the Fed raised interest rates for the first time in nearly ten years.
While the Fed acknowledged improvements in several key areas of the economy in its much-scrutinized policy statement, it made no language changes to hint that a rate increase may soon be forthcoming.
Read more about Steady Rates and Three Companies in the News 07-28-16